Debt Ceiling Bogs Down Obamacare Tax Repeal

Looming negotiations to raise the debt ceiling appear to be at the heart of what is stalling stand-alone legislation to repeal Obamacare’s medical-device tax.

Rep. Erik Paulsen, R-Minn., has lined up more than 218 co-sponsors for his bill to repeal the tax on medical-device manufacturers created as a part of the Affordable Care Act. But House Republican leaders and key GOP committee members, concerned with maintaining their negotiating position in the upcoming debt ceiling talks, do not want to send Senate Majority Leader Harry Reid, D-Nev., a revenue bill that he could use to jam them.

The Senate recently approved in overwhelmingly bipartisan fashion a nonbinding amendment to repeal the medical-device tax, and Minority Leader Mitch McConnell, R-Ky., has lobbied House Republicans to move legislation and force a vote in his chamber. Paulsen has indicated his support. But Republican sources on and off Capitol Hill have confirmed that GOP leaders don’t want to give Senate Democrats a vehicle they could use to combine a debt ceiling hike with tax increases.

“Once we launch vehicles they can do anything they want with it over there. So I think our leadership’s being wisely cautious on this matter,” Rep. Tom Cole, R-Okla., said Thursday during a brief interview. “Frankly, while we all support the repeal of the medical device tax and I think that’s something that will happen, it’s probably better done in a larger deal or done after the debt ceiling, or in some larger agreement around the debt ceiling.”

“Keep in mind that the debt ceiling is not a revenue bill so the Senate can self- start, but cannot include tax provisions in that vehicle,” a Republican lobbyist added.

The Constitution mandates that revenue bills originate in the House, and currently no such legislation is on the Senate calendar. When a Senate leader or Senate majority conference wants to move tax legislation that the House opposes, it has been common practice for the Senate to gut and replace with new legislative language a revenue bill that was previously passed by the House and sent over to the Senate for consideration.

A former House Republican leadership aide confirmed that GOP leaders are concerned that Reid might use a revenue bill against them in the debt ceiling negotiations. The deadline to raise the borrowing limit hits May 19, but it could be delayed. But aside from their concern about the debt ceiling, House Republicans don’t trust Reid or President Barack Obama generally, and fear they might hijack a revenue bill if it’s not sent over as part of an agreement.

“On a scale of one to 10, GOP distaste for a revenue bill lingering in the Senate weighs in at 11. Especially when you have a president and Democrats in unison calling for more revenue and they only need a few GOP senators to cut a bad tax deal,” the former House GOP leadership aide said. “Even under peace time conditions the House doesn’t like sending revenue bills over because they can come back to haunt you in 18 months in a completely different political environment.”

To a lesser degree, Michigan Rep. Dave Camp’s preference to move the medical-device tax repeal through a comprehensive tax overhaul could influence how Republican leaders handle this matter.

Sources say the Ways and Means chairman wants to include as many sweeteners in the tax overhaul bill as possible to create the best chance for this notoriously difficult effort to generate the support it needs to come to fruition.

Allowing a popular measure such as the medical-device tax repeal to proceed separately removes a reason for a particular constituency to support comprehensive tax reform and makes it harder for Camp to convince both vested interests and members to support the elimination of popular provisions. Camp’s bill is currently under construction in Ways and Means, where bipartisan working groups are writing an overhaul that seeks to simplify the tax code and lower personal and corporate rates.

“How many constituencies can you pull into this effort?” is how one senior Republican congressional aide described Camp’s approach.